THE MEDIA BUSINESS; In San Jose, Knight-Ridder Tests a Newspaper Frontier

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Last May, The San Jose Mercury News started a series of electronic services available by computer, telephone and fax. It calls them electronic extensions of the newspaper -- on-line copies of the contents of the newspaper, news updates, news conference transcripts, electronic "chats," movie theater schedules and more.

The quantity and quality of its electronic services puts The Mercury News, in Silicon Valley, south of San Francisco, ahead of most newspapers in the country at turning the whirl of hyperventilated predictions about the electronic future into a real daily offering. More than most newspapers, The Mercury News considers its electronic ventures as part of its basic product.

It is too early to tell whether the new services of The Mercury News will become essential or forgotten as gimmicks. But the lessons learned here and in other newspapers' electronic ventures are likely to shape American newspapers for decades.

A visit to the electronic branch of the newspaper, known as Mercury Center, showed that the process of grafting new electronic media onto print journalism is surprisingly complex. Although Mercury Center is situated just off the main newsroom, it sometimes seems as if the electronic editors are rethinking some of the fundamentals of journalism.

"It's as if we were about to cover a major story, and we said, 'Should we cover this in a broadsheet form or a tabloid form or what?' " said Chris Jennewein, a former newsroom editor at The Atlanta Journal and Constitution, who is now general manager of Mercury Center.

The transition to electronic journalism is bringing with it some challenges to old rules of the trade. Mercury Center, for instance, includes news and business employees, breaching the traditional wall that separates the two at most newspapers. Its executives say they are committed to maintaining editorial independence, but contend that news and business employees must work together to shape the new venture into a money-making enterprise.

To the consternation of some in the newsroom, editors of the electronic service decided to include raw information like company news releases in the data available to its subscribers. Such material is, by definition, undigested by any journalist. Some at the newspaper said the practice raised the question of whether newspapers should be mere conduits of unedited and often self-serving information or whether they needed to preserve their traditional role as filters for competing points of view. A Big Investment

Mercury Center editors said that when an individual or company used a news release to make an accusation, they sought reply news releases from the accused. The editors said that one of Mercury Center's functions is to allow subscribers to make their own decisions.

The project here is being studied by newspapers across the country, in part because it involves a significant investment by Knight-Ridder Inc., the parent of The Mercury News. Knight-Ridder, one of the nation's largest newspaper companies, is spending millions of dollars to finance Mercury Center, the newspaper's executive editor, Robert D. Ingle, said.

That is drawing special scrutiny because Knight-Ridder was the country's most aggressive newspaper company in the initial push toward electronic media in the 1980's. After three years of trying to sell an on-line news and information service, called Viewtron, Knight-Ridder admitted defeat in 1986. The company's loss of at least $50 million has been cited ever since by skeptical news executives as a warning that electronic ventures can be business disasters.

In the new operations here, subscribers pay basic fees of $2.95 for the telephone and fax service, and $9.95 a month for the computer service that is part of the America Online system. The on-line fee also provides access to America Online's other services.

On-line subscribers can read the news as it is printed in the newspaper. Few editors say they believe readers use the service for that purpose, however, since the system is cumbersome compared with a printed newspaper and does not include photographs or graphics alongside the text. Obtaining News by Code

But the on-line subscribers can also use scores of code numbers printed in the newspaper every day to call up material that does not get into print, including the details of events from the Bay Area to Bosnia. For an extra charge, subscribers can obtain articles from the paper's past coverage.

Computer users can also send messages to one another and to the newspaper's staff. They can question occasional visiting dignitaries, like Mayor Susan Hammer of San Jose (SJMayor in cybertalk), who answered questions on-line last month. On Martin Luther King Jr.'s birthday, subscribers could call to hear excerpts from speeches by the civil rights leader.

Mr. Ingle acknowledged that at least one new service had a difficult time attracting users. The telephone service, which was added to the electronic offerings in November, allows readers without computers to punch in the same codes to obtain information by fax. But it also lets readers simply listen to news features over the phone.

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"We're having a tremendous problem getting people to understand what it is," Mr. Ingle said.

The on-line service of The Mercury News has gained 5,100 new subscribers for America Online since May. That represents less than 20 percent of America Online's 30,000 subscribers in the San Francisco Bay area and less than 2 percent of The Mercury News's daily circulation of 282,488. A Media Convergence

But Mr. Ingle said that he was confident that the number of subscribers would grow. Executives here said their newspaper needed Mercury Center for two main reasons.

First, they said, they were convinced that technological changes were bringing all forms of media together. Eventually, Mr. Ingle said, "multimedia reporters" will carry audio-visual equipment and will supply reports in different forms.

Second, the executives said electronic ventures allowed newspapers to broaden their community roles -- a change that could help them fight the declining reader loyalty that has plagued the industry for years. Electronic publishing gives a newspaper the tools to focus on small parts of its audience by providing vast amounts of information that may not interest a general audience, said Bill Mitchell, the director of electronic publishing at The Mercury News and the top executive of the Mercury Center.

The printed newspaper could be revitalized, Mr. Mitchell said, by concentrating on coverage of more universal interest. "The idea is to use the newspaper as a bridge to point to a great deal more than we can deliver in the traditional way," he said.

The printed Mercury News is peppered each day with cross-references to material available on-line, and with instructions on how to obtain it.

The other day, the paper advised that by punching the code N620 on a telephone key pad or computer, readers could get a report about efforts to channel disabled children into ordinary school classes. B770 would bring a news release on the financial results of Sun Microsystems, one of the area's big companies. Increasing the Information Load

Newly hired editors for the electronic venture scour the wire services for reports that augment the contents of the printed newspaper. They ask reporters to get transcripts of local news conferences or legal documents that are the subjects of articles but are not printed in the newspaper. These new editors are called "senders" because their job is to send material to the computer.

Mr. Ingle, the executive editor, said the electronic service had helped to revitalize the newspaper by giving readers a way to communicate with it and feel involved in it. Computer bulletin boards, electronic mailboxes and an almost unlimited number of interactive possibilities, he said, would alter the newspaper.

Reporters at The Mercury News are urged to respond to electronic mail from readers. Several reporters have conducted their own on-line sessions to take questions or comments.

In interviews, sentiment appeared to be divided on how significant that communication was. Some reporters said the level of discourse varied from "babble" and petty complaints to insights about what kinds of coverage might interest readers and even news tips that might never have reached the newsroom otherwise.

It is early in the development of the medium. So it is no surprise that there are what sound like agnostics around The Mercury News. Rob Elder, editor of the paper's editorial page, has been a newspaperman for 35 years. "The information is only as elegant as the author makes it," Mr. Elder said. "It can still be 'garbage in, garbage out.' "

A version of this article appears in print on February 7, 1994, on Page D00001 of the National edition with the headline: THE MEDIA BUSINESS; In San Jose, Knight-Ridder Tests a Newspaper Frontier. Order Reprints|Today's Paper|Subscribe